N4 Introductory Financial Accounting | Student Book 6.4 Petty Cash Journal


6.4.1 Purpose of the petty cash A business needs cash to make small payments, e.g. buying coffee, tea and sugar, cleaning of the offices, etc. It would not be cost-effective to make use of cheques for these payments. Instead the business will make use of its petty cash. All payments made of petty cash will be recorded in the Petty Cash Journal and at the end of the month, it would be posted to the General Ledger.


6.4.2 The transfer of money from the bank to the petty cash account


An inter account transfer is the movement of money from one bank or cash account of a business entity to another. No funds enter or leave the business. A transfer is not possible unless the business has at least two bank or cash accounts. Examples of transfers include: Withdrawing cash from a bank account for a petty cash fund


6.4.3 The petty cash voucher


• The source document use for petty cash payment is the petty cash voucher. • The petty cash voucher is numbered and must be authorised. • Petty cash vouchers are internal source documents as they are drawn up within the business and it provides details of payments made of petty cash. • The petty cash account is regarded as a current asset.


6.4.4 Opening the Petty Cash Journal


The Petty Cash Journal entry is a debit to the petty cash account and a credit to the cash account. The petty cash custodian refills the petty cash drawer or box, which should now contain the original amount of cash that was designated for the fund. The cashier creates a journal entry to record the petty cash receipts. An example how to record transactions in a Petty Cash Journal is explained below.


6.4.5 Cash payments from petty cash


• Purchase of non-current assets – petty cash a computer mouse • Payment of current expenditure • Petty cash is a small amount of money for small expenses. Most people use petty cash for things like buying coffee, sugar and milk for staff


• Purchase of trading inventory for example office supplies and paying for postage • Cash withdrawals of the owner like flowers • Other payments on behalf of the owner for example fuel and parking for work trips


6.4.6 Posting of the petty cash entries to the ledger Example


Compile the Petty Cash Account for March 20.1 in the books of Kathu Stationers. The following information is given: • An imprest amount of R 800 is kept in the petty cash. • The balance of the petty cash account on March 20.1 was R200. • On 1 March 2015 the petty cashier received an amount from the cashier to reimburse the imprest amount.


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